The South African Reserve Bank (SARB) will begin regulating cryptocurrencies as soon as 2023. SARB intends to treat crypto as financial assets, rather than as forms of currency.
That’s according to SARB Deputy Governor, Kuben Naidoo during an online seminar hosted by PSG. Under the new proposed legislation, digital assets would be listed under FICA. You know, that finance thing we all find so irritating?
This is quite a change of tone. In 2014, SARB’s stance on cryptocurrencies was that it was a fad that would eventually fade away. Cryptocurrency has only gotten bigger in the time since. And smaller. And then bigger again… leading SARB to change its tune. SARB has been following other countries’ economies closely, especially where cryptocurrencies flourish. SA’s Reserve Bank feels that regulation is needed now.
When asked about what sort of timeframe to expect, Naidoo said that we should expect around 12 to 18 months. Several steps must take place. First, the Minister of Finance needs to amend schedule 1 of the FICA Act. In doing this, he will be able to categorise cryptocurrency as a financial product. Next, the Financial Sector Conduct Authority must develop the regulatory framework surrounding licensing exchanges.
While designing this framework, some basic protection principles are required. Naidoo said that KYC (Know Your Customer) must be put in place, along with a “health warning” to warn people about the dangers of trading cryptocurrency.
“One of the major benefits here? Exchanges will be compelled to collect KYC data from their users. The implementation of a KYC program is low-hanging fruit in the digital assets space. It is one of the easiest ways to make the trading of cryptocurrencies and other digital assets more secure, keeping assets away from terrorists and other bad actors,” explains Richard Gardner, CEO of Modulus, a US developer of trading and surveillance technology.
Currently, SARB believes that regulating the sector can better protect the nearly six-million crypto holders in SA. It admits that its initial dismissal of crypto was incorrect. The body plans to make it official before crypto spreads further into the country. As it penetrates more industries, regulation will prove crucial.